Pack 2000, Inc. v. Cushman

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PACK 2000, INC. v. EUGENE C. CUSHMAN
(SC 18789)
Rogers, C. J., and Norcott, Palmer, Zarella, Eveleigh,
McDonald and Vertefeuille, Js.*
Argued March 12, 2013—officially released May 20, 2014
Eric W. Callahan, for the appellant (plaintiff).
Andrew J. O’Keefe, with whom, on the brief, was
Joseph M. Busher, Jr., for the appellee (defendant).
Opinion
PALMER, J. In July, 2002, the plaintiff, Pack 2000,
Inc., and the defendant, Eugene C. Cushman, entered
into a series of agreements pursuant to which the defen-
dant was to transfer the management and, ultimately,
at the option of the plaintiff, the ownership of two Midas
automobile repair shops to the plaintiff. The agreements
also provided the plaintiff with options to purchase the
realty on which the shops were located, on condition
that the plaintiff, at the time it exercised the options,
was and previously had been in compliance with the
terms of the agreements. In August, 2003, the plaintiff
sought to exercise the options, but the defendant
refused to convey the properties, claiming that the
plaintiff had not strictly complied with the terms of the
agreements. The plaintiff thereafter brought the present
actions, alleging entitlement to specific performance of
the options to purchase the realty.1 Following a court
trial, the court concluded that the plaintiff was entitled
to specific performance of the options because it had
substantially complied with the terms of the agree-
ments. The defendant appealed to the Appellate Court,
claiming that the trial court improperly had applied a
standard of substantial compliance, rather than a stan-
dard of strict compliance, with the terms of the parties’
agreements in determining whether the plaintiff had
satisfied the conditions precedent for exercising the
options. See Pack 2000, Inc. v. Cushman, 126 Conn.
App. 339, 340–41, 345–46, 11 A.3d 181 (2011). The defen-
dant also claimed that the evidence established that the
plaintiff had not strictly complied with the agreements.
Id., 346. The Appellate Court agreed with both of the
defendant’s claims and, accordingly, reversed the judg-
ments of the trial court and remanded the case to that
court with direction to render judgments for the defen-
dant. Id., 341, 351. We granted the plaintiff’s petition
for certification to appeal, limited to the following
issues: ‘‘Did the Appellate Court properly determine
that lease/option agreements are subject to a strict com-
pliance standard? If so, should the [judgment of the]
Appellate Court be reversed under the applicable stan-
dard?’’ Pack 2000, Inc. v. Cushman, 301 Conn. 907, 19
A.3d 177 (2011). We agree with the plaintiff that, con-
trary to the conclusion of the Appellate Court, the trial
court properly applied a standard of substantial rather
than strict compliance in resolving the plaintiff’s claim
and, further, that the trial court properly determined
that the plaintiff is entitled to specific performance of
the options because it had substantially complied with
the terms of the parties’ agreements. We therefore
reverse the judgment of the Appellate Court and remand
the case to that court with direction to affirm the judg-
ments of the trial court.
The opinion of the Appellate Court sets forth the
following relevant facts and procedural history, as sup-
plemented by the record. ‘‘In July, 2002, the plaintiff,
the defendant and ARCO Corporation (ARCO),2 a corpo-
ration controlled by the defendant, entered into a busi-
ness transaction in which two Midas [automobile
repair] shops3 (shops) were to be transferred from
ARCO to the plaintiff. As part of the transaction, the
parties executed a number of agreements, including
[1] two lease agreements, under which the defendant
leased [to the plaintiff] the [real property on which] the
shops are located . . . [2] a management agreement,
under which the plaintiff assumed responsibility for the
management and operation of the shops . . . [3] a let-
ter of intent . . . and [4] two promissory notes. [The
defendant, an experienced attorney, drafted all of the
agreements between the parties.]
‘‘Each lease agreement contains a clause . . . that
provide[d] the plaintiff with an option to purchase the
leased [property] subject to certain terms and condi-
tions. The language of the two clauses is essentially
identical. Each clause provides in relevant part: ‘So long
as [the plaintiff] has been in compliance with the terms
and conditions of this Lease, the Letter of Intent, and
Management Agreement . . . and is in compliance
with such instruments when the option is exercised,
[the plaintiff] shall have the option to purchase the real
estate subject to this lease. . . . The option shall be
exercised by [the plaintiff] giving [the defendant] three
months advanced notice, in writing. The option may be
exercised by giving the aforesaid notice between the
date of this Lease [July 25, 2002] and the fifth anniver-
sary of [the] same.’
‘‘The management agreement also refers to the plain-
tiff’s options to purchase the defendant’s realty and
contains the following language . . . as it relates to
the options: ‘The [plaintiff] shall be given an option
to purchase the real estate upon which the shops are
located. Said option shall be by separate agreement and
signed by the titleholder and the party designated by
[the plaintiff] to take title. Such option shall cite sepa-
rate consideration and shall contain the terms as gener-
ally outlined herein. (a) Such option may be exercised
between [the] date of commencement herein and the
fifth anniversary of [the] same. . . . (f) [The plaintiff]
must be in full compliance with this agreement and any
lease agreement at the time of exercise.’ [The manage-
ment agreement also contains a provision granting the
plaintiff an option to purchase the shops ‘[s]o long as
[the plaintiff] is in compliance with all of the terms and
conditions of [the management] agreement, the letter
of intent and any option agreement . . . .’]
‘‘In addition to the two lease agreements and the
management agreement, the letter of intent also con-
tains language that refers to the options [to purchase
the realty]. It provides in relevant part: ‘[The plaintiff]
has the option to purchase from [the defendant] the
buildings and the land housing the [s]hops, if this
agreement and the . . . Management Agreement are
executed. The option is for five years from the date of
the Management Agreement. The price will be as
appraised.’
‘‘Under the terms of the two lease agreements, the
management agreement and the promissory notes, the
plaintiff was required to make a number of periodic
payments both to the defendant and to certain third
parties in order to exercise the options. Specifically,
the plaintiff was required to pay rent to the defendant
by the first day of each month during the term of the
lease[s], to make payments on both promissory notes
by the eighth day of each month until the notes were
fully paid and to pay all accounts, including, but not
limited to, utilities, telephone service, real estate taxes,
and hazard and liability insurance as well as an equip-
ment lease. At trial, the defendant testified that timely
payment of the aforementioned accounts was vital and
that he informed the plaintiff that untimely payments
would jeopardize his franchise agreements with Midas
and his mortgages on the two shops.
‘‘Nevertheless, the record reveals that the plaintiff
was often late in making the aforementioned payments.
Specifically, the record reveals that the following pay-
ments were late: the rent payment due on May 1, 2004;
three payments on the promissory notes due on Febru-
ary 8, 2003, and May 8 and June 8, 2006; one payment
to Groton Utilities, which resulted in a shutoff notice
that the defendant forwarded to the plaintiff on January
23, 2003; several payments to a telephone company,
which resulted in several collection letters and tele-
phone calls that the defendant received in late 2002 and
early 2003 as well as a threat to terminate telephone
service to the defendant’s unrelated business in March,
2003; two real estate tax installments on the New Lon-
don shop due January 1, 2005, and January 1, 2007; one
real estate tax installment on the Groton shop due July
1, 2007; twelve hazard and liability insurance install-
ments between November, 2002, and January, 2004, that
resulted in cancellation notices issued on July 30, 2003,
and November 29, 2004; twenty health insurance install-
ments between October, 2002, and September, 2005;
and several installments under the terms of an equip-
ment lease that resulted in several collection calls to
the defendant in 2002 and 2003. [With respect to these
late payments, however, the trial court found that all
‘were, on the whole, made within a commercially rea-
sonable time’ and, further, that the tardiness of the
payments was attributable to ‘administrative ineffi-
ciency as opposed to financial insolvency.’]
‘‘On August 22, 2003, the plaintiff’s vice president, M.
Paulina Anderson, faxed a letter to the defendant in
which she stated that she wanted ‘to finalize the pur-
chase of the shops and exercise the option[s] to pur-
chase the real estate by the end of 2003.’ On August
29, 2003, Anderson sent a second letter to the defendant
in which she sought information about . . . possible
appraisal[s] and indicated that Banterra Bank (bank)
could not commit to financing the purchase until it had
ascertained the value of the defendant’s realty.
‘‘On September 2, 2003, the defendant, on behalf of
ARCO, sent a letter to Anderson in which he stated that
the plaintiff was not in compliance with the terms and
conditions of the management agreement. Specifically,
the letter stated: ‘The installment payment regarding
the . . . Management Agreement which was due Sep-
tember 1, 2003 has not been received. Per the provisions
of said agreement, the monthly installments are due on
the first day of each month. Your monthly payments
have been consistently late and have required telephone
calls from [ARCO] nearly every month in order to
prompt the payment. Timely payment of the note was
and is a material condition of the agreement. As you
have known from the inception, ARCO . . . is depen-
dent [on] timely payments from you in order to remain
in compliance with its obligations concerning various
mortgages. Your late payment for August put ARCO
. . . in default with one of its mortgagees. This is an
intolerable circumstance. You are hereby put on notice
that this late payment, and all of the prior late payments,
and any future late payments [put] you out of compli-
ance with the terms and conditions of the Management
Agreement. Subsequent acceptance of the September,
2003 payment (or any future payment tendered after
the date due) will not cure the non-compliance, nor
does ARCO . . . waive any rights or consequences
which flow from your non-compliance.’ There is no
record of the plaintiff having specifically responded to
this letter. [It is apparent, however, that the parties
treated this letter as the defendant’s repudiation of the
plaintiff’s right to exercise the purchase options due to
its late payments.]
‘‘On May 16 and 19, 2006, the plaintiff again sought
to exercise the options to purchase the defendant’s
realty. At that time, however, the payment on one of
the promissory notes that was due on May 8, 2006, had
not been paid.
‘‘On July 17, 2006, the plaintiff commenced these
actions against the defendant claiming that it was enti-
tled to specific performance of the options to purchase
the defendant’s realty. In its disclosure of defense, filed
on August 4, 2006, the defendant argued that the plain-
tiff’s claim was without merit because, among other
things, the plaintiff had not complied with the terms of
one of the promissory notes and the conditions of the
lease at the time of its attempt to exercise the options,
and, therefore, the options had been forfeited or termi-
nated by the plaintiff’s fault or noncompliance. As of
the date of trial, the plaintiff had paid the defendant in
excess of $600,000 in rent under the terms of the lease
agreements, $700,000 under the terms of the promissory
notes and was not in arrears on its financial obligations
under the terms of any of the aforementioned agree-
ments.’’ (Footnotes altered.) Pack 2000, Inc. v. Cush-
man, supra, 126 Conn. App. 341–45.
At trial, the defendant testified that, although he
believed that many of the late payments ‘‘technically
were [in] noncompliance’’ with the parties’ agreements,
he did not take any action against the plaintiff with
respect to those payments until after the plaintiff sought
to exercise the options because it was not until then
that the defendant decided he had ‘‘had enough.’’ As
the defendant stated, he did not ‘‘at any time’’ prior to
August 22, 2003, ‘‘press’’ any of these late payments as
grounds for terminating the options, apparently
because he did not believe that there was sufficient
need or reason to do so. The defendant further testified
that, in view of the nature of the parties’ transaction,
in particular, the fact that all of the accounts remained
in his name, so that he, rather than the plaintiff, received
all of the monthly billing statements, the defendant
‘‘understood that [initially, there] were going to [be]
some bumps . . . .’’ ‘‘There were all kinds of [tele]-
phone calls back and forth between [the defendant’s]
organization and [the plaintiff’s] organization, [as the
parties were] trying to figure out [who was] paying
which bill, which responsibility, what adjustments.’’
Furthermore, each of the agreements contains a default
provision pursuant to which the defendant was required
to give written notice of a default, after which the plain-
tiff has either twenty days (lease agreements) or thirty
days (management agreement) to cure the default.
‘‘Default’’ is defined in the management agreement to
include, ‘‘but not be limited to, nonpayment of any obli-
gation . . . .’’ The defendant, however, never gave
notice of a default prior to the plaintiff’s request to
exercise the options.
The defendant also testified that, although he was
aware that compliance with the lease and management
agreements was a condition precedent to the plaintiff’s
right to exercise both the options to purchase the shops
and the options to purchase the real property, he had
‘‘no problem’’ with the plaintiff exercising the shop
options. Specifically, the defendant testified, with
respect to the shop options, that the plaintiff ‘‘[has not]
been defaulted. [The plaintiff has] not always been in
compliance; but [it has] made payments. I’m not con-
cerned with that.’’ The defendant also testified that, ‘‘[i]f
[the plaintiff] wanted to pay cash for . . . the Groton or
New London shops and pay down [the promissory]
note, I would not consider [the plaintiff] in noncompli-
ance. I would agree to that. I would let [the plaintiff]
do that.’’
‘‘On August 11, 2008, the trial court rendered judg-
ments in favor of the plaintiff. The court determined
that the plaintiff had retained the right to exercise the
options because it had substantially complied with the
terms and conditions of the [parties’ agreements]. [In
support of this conclusion, the court found that the late
payments generally had been made within a commer-
cially reasonable time.] The court also determined that
the plaintiff had effectively exercised the options on
August 22, 2003, and was entitled to specific perfor-
mance.4 The court, therefore, ordered the defendant to
sell the realty at issue to the plaintiff under the terms
of their agreements.’’5 (Footnote added.) Pack 2000,
Inc. v. Cushman, supra, 126 Conn. App. 345–46. In
reaching its conclusion, the trial court observed that,
although a strict compliance standard applies to the
‘‘actual exercise of an option’’; (emphasis omitted);
when an option is conditioned on a lessee’s compliance
with a lease, a substantial rather than strict compliance
standard applies to ‘‘the issue of whether a lessee pos-
sesse[s] the right to exercise an option,’’ that is, to the
issue of the sufficiency of the lessee’s performance
under the lease. With respect to the issue of specific
performance, the trial court found that the defendant
had ‘‘enjoyed, and continues to enjoy, the benefits of
the agreements with the plaintiff, including the receipt
of [more than] $1.3 million since 2002.’’ The trial court
concluded that ‘‘[t]o allow [the defendant] to enjoy [all
of] the benefits of his bargain with [the] plaintiff while
avoiding the less financially attractive elements of the
transaction,’’ namely, conveyance of the real property
on which the shops are located, ‘‘would be inequitable.’’
In a subsequent articulation, the trial court stated that
the plaintiff had established by a preponderance of the
evidence that it was ‘‘ready, willing and able to exercise
the options’’ at the time that it sought to do so.
The defendant appealed to the Appellate Court from
the judgments of the trial court, claiming, inter alia,
that the trial court was required to apply a strict rather
than a substantial compliance standard in determining
whether the plaintiff had satisfied the terms of the lease
and management agreements and, in addition, that the
trial court incorrectly concluded that the plaintiff had
retained the right to exercise the options notwithstand-
ing its late payments to the defendant. See Pack 2000,
Inc. v. Cushman, supra, 126 Conn. App. 340–41. The
Appellate Court agreed with the defendant. Id., 341.
Relying primarily on Brauer v. Freccia, 159 Conn. 289,
268 A.2d 645 (1970), the Appellate Court explained that
this court ‘‘has determined, albeit implicitly, that when
a lease provides the lessee with the option to purchase
realty subject to certain terms and conditions, the right
of the lessee to exercise the option is contingent on
the lessee’s strict compliance with those terms and
conditions.’’ Pack 2000, Inc. v. Cushman, supra, 347.
The Appellate Court further determined that, because
the plaintiff was obligated under the lease ‘‘to make
periodic payments to the defendant and to certain third
parties by specified deadlines’’; id., 350; but was ‘‘often
late in making [those] required payments’’; id., 351; the
plaintiff’s right to enforce the options had expired prior
to August 22, 2003, the date on which, according to the
trial court, the plaintiff had effectively exercised the
options. See id., 346, 350–51. In accordance with these
conclusions, the Appellate Court reversed the judg-
ments of the trial court and remanded the case to that
court with direction to render judgments for the defen-
dant.6 Id., 351.
On appeal to this court, the plaintiff challenges the
Appellate Court’s determination that the trial court
improperly applied a substantial compliance standard
in concluding that the plaintiff was entitled to specific
performance of the options. For the reasons set forth
hereinafter, we agree with the plaintiff that, when a
purchase option is conditioned on a lessee’s compliance
with the terms of a lease, in the absence of express
contractual language to the contrary, the option is
enforceable against the lessor if the lessee has substan-
tially complied with the lease terms and the lessee is
not in default at the time it seeks to exercise the option.
We also agree with the plaintiff that the trial court
reasonably found that the plaintiff had substantially
complied with the lease and management agreements.
Finally, we reject the defendant’s claim that the judg-
ment of the Appellate Court may be affirmed on the
alternative ground that the evidence does not support
the trial court’s finding that the plaintiff was ready,
willing and able to purchase the properties at the time
it sought to do so.
I
We first address the plaintiff’s claim that the Appel-
late Court incorrectly concluded that the plaintiff for-
feited the right to exercise the options because it failed
to make certain periodic payments to the defendant
and other third parties by deadlines specified in the
parties’ agreements.7 In support of its claim, the plaintiff
maintains that the Appellate Court misinterpreted and,
as a result, misapplied our decision in Brauer, which,
according to the plaintiff, is entirely consistent with the
general rule that a lessee is entitled to enforcement of
the lease provisions if it has complied substantially with
its obligations under the lease. The plaintiff further con-
tends that this general rule requiring substantial rather
than strict compliance with the lease terms applies to
its performance under the lease and management
agreements.
Several well established principles guide our analysis
of the plaintiff’s claim. As the Appellate Court correctly
acknowledged, ‘‘[t]he general rule with respect to com-
pliance with contract terms . . . is not one of strict
compliance, but substantial compliance.’’ (Internal quo-
tation marks omitted.) Pack 2000, Inc. v. Cushman,
supra, 126 Conn. App. 348–49; accord ED Construction,
Inc. v. CNA Ins. Co., 130 Conn. App. 391, 410, 24 A.3d
1 (2011); 15 R. Lord, Williston on Contracts (4th Ed.
2000) § 44:52, p. 217. ‘‘The doctrine of substantial com-
pliance is closely intertwined with the doctrine of sub-
stantial performance.’’ Pack 2000, Inc. v. Cushman,
supra, 349. ‘‘The doctrine of substantial performance
shields contracting parties from the harsh effects of
being held to the letter of their agreements. Pursuant
to the doctrine of substantial performance, a technical
breach of the terms of a contract is excused, not
because compliance with the terms is objectively
impossible, but because actual performance is so simi-
lar to the required performance that any breach that
may have been committed is immaterial.’’ (Internal quo-
tation marks omitted.) Id.; accord Clem Martone Con-
struction, LLC v. DePino, 145 Conn. App. 316, 336, 77
A.3d 760, cert. denied, 310 Conn. 947, 80 A.3d 906 (2013);
15 R. Lord, supra, § 44:52, pp. 221–22.
As this court recently has observed, an option to
purchase, like the one at issue in the present case,
operates as ‘‘a continuing offer to sell, irrevocable until
the expiration of the time period fixed by agreement
of the parties, which creates in the option holder the
power to form a binding contract by accepting the
offer.’’ (Internal quotation marks omitted.) Bayer v.
Showmotion, Inc., 292 Conn. 381, 409, 973 A.2d 1229
(2009); see also Parkway Trailer Sales, Inc. v. Wool-
dridge Bros., Inc., 148 Conn. 21, 25, 166 A.2d 710 (1960)
(tenant’s exercise of purchase option in lease resulted
in ‘‘a binding bilateral contract . . . obligat[ing] [the
landlord] to convey title by good and sufficient deed
and obligat[ing] [the tenant] to accept the deed and pay
the purchase price’’). ‘‘It is widely accepted that, upon
exercise of the option, the lease is extinguished, and
the relationship of landlord and tenant becomes that
of vendor and vendee.’’ Bayer v. Showmotion, Inc.,
supra, 414. Furthermore, in light of this change in the
parties’ relationship following the lessee’s timely exer-
cise of the option, ‘‘[the lessors cannot] rely on alleged
breaches occurring after [the lessee’s] exercise as
grounds for forfeiture.’’ Summa Corp. v. Richardson,
93 Nev. 228, 235, 564 P.2d 181 (1977).
With respect to the actual exercise of the option,
‘‘[t]o be effective, an acceptance of an offer under an
option contract must be unequivocal, unconditional,
and in exact accord with the terms of the option. . . .
If an option contract provides for payment of all or a
portion of the purchase price in order to exercise the
option, the optionee . . . must not only accept the
offer but pay or tender the agreed amount within the
prescribed time.’’ (Internal quotation marks omitted.)
Bayer v. Showmotion, Inc., supra, 292 Conn. 409. ‘‘[I]n
order to determine whether the [plaintiff] formed a
binding contract with [the defendant] by exercising its
option to purchase the property, we . . . review the
terms of the [applicable agreements] to determine
whether the [plaintiff’s exercise] was unequivocal,
unconditional, and in exact accord with the terms of
the [applicable agreements].’’ (Internal quotation marks
omitted.) Id. ‘‘Whether the performance of a certain act
by a party to a contract is a condition precedent to the
duty of the other party to act depends on the intent of
the parties as expressed in the contract and read in the
light of the circumstances surrounding the execution
of the instrument.’’8 Brauer v. Freccia, supra, 159
Conn. 293.
With these principles in mind, we now address the
plaintiff’s claim that the Appellate Court, in reversing
the judgments of the trial court, improperly concluded
that the plaintiff had forfeited its right to exercise the
options because it did not comply strictly with the lease
provisions, a conclusion that, in the Appellate Court’s
view, was ‘‘implicitly’’ mandated by our decision in
Brauer. Pack 2000, Inc. v. Cushman, supra, 126 Conn.
App. 347. Because the Appellate Court’s reliance on
Brauer is misplaced, we turn first to an examination
of that case.
In Brauer, the trial court denied the lessees’ request
for specific performance of an option predicated on its
finding that the lessees were seven months in arrears
on their rental payments when they sought to exercise
the option; see Brauer v. Freccia, supra, 159 Conn.
292–93; and because the option was expressly condi-
tioned on the lessees having ‘‘duly and punctually ful-
filled all the provisions, agreements, covenants and con-
ditions of [the] lease.’’ (Internal quotation marks omit-
ted.) Id., 293. Although the lessees subsequently
attempted to tender payment in full after seeking to
invoke the option provision of the lease; see id., 292;
the trial court concluded ‘‘that the payment of all rent
due under the lease was a condition precedent to the
[lessees’] right to exercise the option to purchase; that
the conduct of the [lessor in failing to terminate the
lease for nonpayment of rent] did not constitute a
waiver of [his] rights and did not estop [him] from
relying on the provision of the option [that] required
prompt payment of the rent; that the failure to pay the
rent for [seven] months . . . was due to gross negli-
gence; that the failure to pay rent when due was not
the result of accident, mistake or illness; and that the
[lessees] were not entitled to equitable relief.’’ Id.,
292–93.
In affirming the judgment of the trial court, this court
stated that the option ‘‘clearly indicate[d] that the [les-
sor’s] duty to comply with the terms of the option was
conditioned [on] the [lessees’] punctual performance
of their obligations under the lease. A tenant who fails
to meet the named conditions of [a] lease defeats his
right to rely on it when he makes an effort to purchase
the property pursuant to the option in the lease.’’ Id.,
293–94. This court specifically characterized the lan-
guage imposing the punctuality requirement as ‘‘lucid
and unambiguous . . . .’’ Id., 293. This court therefore
concluded that the trial court correctly had determined
that, ‘‘since the [lessees] had failed to perform their
obligations under the lease, the right to enforce the
option to purchase was not in existence and the [lessor
was] under no obligation to convey the property.’’
Id., 294.
In Brauer, it is apparent that the lessees’ breaches
were material: they were seven months in arrears on
rent at the time they sought to exercise the option,
which, under the terms of the lease, was expressly
conditioned on the prompt payment of rent. Contrary to
the determination of the Appellate Court in the present
case, however, there is nothing in Brauer to suggest
that a nonmaterial breach of the lease also would have
defeated the option rights of the lessees in that case.9
Although we had no occasion to address that issue
in Brauer because the lessees’ breach in Brauer was
material by any objectively reasonable standard, courts
that have addressed the issue uniformly have concluded
that a nonmaterial breach of a lease does not extinguish
a lessee’s rights under a purchase option provision. See,
e.g., Bachorz v. Miller-Forslund, 703 F.3d 27, 35 (1st Cir.
2012) (‘‘minor, immaterial or inconsequential breaches,
which do not prejudice the lessor, will not prevent a
lessee from exercising an option’’ [internal quotation
marks omitted]); Trinity Realty I, LLC v. Chazumba,
LLC, 77 Mass. App. 911, 912, 931 N.E.2d 510 (2010)
(lessee’s substantial compliance with lease terms ren-
dered lessee’s performance under lease adequate to
maintain its right to exercise option); Panhandle Reha-
bilitation Center, Inc. v. Larson, 205 Neb. 605, 610–11,
288 N.W.2d 743 (1980) (lessee was entitled to specific
performance of option when lessee substantially per-
formed all obligations under lease); Cimina v. Bronich,
517 Pa. 378, 386–87, 537 A.2d 1355 (1988) (lessee’s fail-
ure to pay real estate taxes, although technical breach
of lease agreement, was immaterial and did not bar
lessee from exercising purchase option); Rowe v. Dor-
man, Texas Court of Appeals, Docket No. 06-12-00024-
CV (Tex. App. October 18, 2012) (lessee’s overall perfor-
mance of its obligations under lease was sufficient to
defeat lessor’s claim that lessee’s failure to make, inter
alia, certain rental and tax payments in timely manner
foreclosed lessee from exercising purchase option
under lease). In fact, the defendant has not identified
a single case, and our research has not revealed one,
in which a court has applied a more stringent standard
of compliance for the purpose of determining whether
a lessee had forfeited his right to exercise a lease pur-
chase option. We conclude, therefore, that, when an
option is conditioned on a lessee’s compliance with a
lease, in the absence of explicit contractual language to
the contrary, a substantial rather than strict compliance
standard applies so that, if the lessee is not in material
breach of the lease when he seeks to exercise the option
and has not previously been defaulted under the terms
of the lease, the option is enforceable against the les-
sor.10
In reaching its determination to the contrary, the
Appellate Court mistakenly relied on the general princi-
ple that an option must be exercised in strict accordance
with its terms. See Pack 2000, Inc. v. Cushman, supra,
126 Conn. App. 349 (‘‘strict compliance is now the rule
in many American jurisdictions’’). This principle, how-
ever, applies solely to the lessee’s acceptance or ‘‘exer-
cise’’ of an option. ‘‘The ‘exercise’ of an option is merely
the election of the optionee to purchase the property.
By the use of the word ‘accept’ in a particular option
contract, the parties mean the same as ‘exercising’ the
option.’’ (Footnote omitted.) 92 C.J.S. 143, Vendor and
Purchaser § 171 (2010). ‘‘An option does not constitute
a sale or a contract to sell, and it cannot be enforced
as a contract by either party thereto until it is exercised
by acceptance of the offer.’’ (Footnote omitted.) Id.,
pp. 143–44. The election to exercise an option must be
made in the way and manner prescribed by law or
specified in the option contract or in the form provided
by its terms.’’ (Footnotes omitted.) Id., p. 144. Thus,
the cases on which the Appellate Court relied to support
its conclusion that the trial court improperly had
applied a standard of substantial rather than strict com-
pliance are inapposite because they all involved the
application of the rule of strict compliance when the
lessee failed to exercise the purchase option in the
manner prescribed by the option.11 See, e.g., LeBaron
Homes, Inc. v. Pontiac Housing Fund, Inc., 319 Mich.
310, 314–15, 29 N.W.2d 704 (1947) (no evidence that
lessee tendered payment as required by option); Raa-
nan v. Tom’s Triangle, Inc., 303 A.D. 2d 668, 669,
758 N.Y.S.2d 343 (2003) (‘‘the [lessees] did not comply
with the option agreement, as extended, having neither
executed the agreed-upon contract of sale, nor tendered
the down payment specified therein’’); Zeidman v.
Davis, 161 Tex. 496, 499, 342 S.W.2d 555 (1961) (lessee
failed to exercise option within time prescribed in
agreement). As another court has explained, and as our
own case law makes clear, ‘‘cases and authorities [that]
suggest vigorous compliance with the requirements of
option conditions . . . tend to deal with flaws in the
exercise of an option, e.g., failure to give notice of the
exercise of an option on time, Donovan Motor Car Co.
v. Niles, 246 Mass. 106, 107 [140 N.E. 304] (1923); failure
to offer the purchase price on exercise of an option,
Hunt v. Bassett, 269 Mass. 298, 302–303 [168 N.E. 783]
(1929); [or] failure to give written notice and furnish
[a] cashier’s check, Epton v. CBC Corp., 48 Ill. App. 2d
274, [280–87, 197 N.E.2d 727] (1964).’’ Westinghouse
Broadcasting Co. v. New England Patriots Football
Club, Inc., 10 Mass. App. 70, 73–74, 406 N.E.2d 399
(1980); see also Smith v. Hevro Realty Corp., 199 Conn.
330, 338–40, 507 A.2d 980 (1986) (exercise of option
was ineffective when lessee failed to tender payment
at time of exercise as required by option); Howard-
Arnold, Inc. v. T.N.T. Realty, Inc., 145 Conn. App. 696,
704–705, 77 A.3d 165 (lessee was not entitled to specific
performance of option to purchase when it had not
tendered payment in accordance with terms of lease
agreement), cert. granted, 310 Conn. 940, 79 A.3d 892
(2013). Because, in the present case, the defendant does
not claim that the plaintiff failed to exercise the pur-
chase options in accordance with the terms of the par-
ties’ agreements, the Appellate Court’s reliance on case
law addressing that situation was misplaced.12
The defendant finally contends that, even if a substan-
tial compliance standard applied to the plaintiff’s per-
formance under the parties’ agreements, the trial court
incorrectly concluded that the plaintiff had substan-
tially complied with those agreements. Whether a party
to a contract substantially performs its obligations
thereunder is ordinarily a question of fact to be deter-
mined by the fact finder. See, e.g., Nor’easter Group,
Inc. v. Colossale Concrete, Inc., 207 Conn. 468, 472, 542
A.2d 692 (1988). Of course, it is not the function of this
court to second-guess the reasonable factual findings
of the trial court; rather, we must accept those findings
unless they are clearly erroneous. ‘‘A finding of fact is
clearly erroneous when there is no evidence in the
record to support it . . . or when although there is
evidence to support it, the reviewing court on the entire
evidence is left with the definite and firm conviction
that a mistake has been committed.’’ (Internal quotation
marks omitted.) 418 Meadow Street Associates, LLC v.
Clean Air Partners, LLC, 304 Conn. 820, 829, 43 A.3d
607 (2012). ‘‘[W]hat constitutes full performance gener-
ally depends [on] the construction of the contract in
light of surrounding circumstances.’’ 17A Am. Jur. 2d
569, Contracts § 611 (2004). ‘‘An important factor [is]
whether the deviation . . . defeated the contract’s pur-
pose . . . .’’ Id., § 619, p. 577. ‘‘Substantial performance
occurs when, although the conditions of the contract
have been deviated from in trifling particulars not mate-
rially detracting from the benefit the other party would
derive from a literal performance, [the defendant] has
received substantially the benefit he expected, and is,
therefore, bound to [perform].’’ (Internal quotation
marks omitted.) Western Distributing Co. v. Diodosio,
841 P.2d 1053, 1058 (Colo. 1992).
Applying these principles to the present case, we
conclude that the trial court’s finding that the plaintiff
substantially complied with the parties’ agreements is
supported by the record. As the trial court found, and
the defendant does not dispute, the defendant has
received and continues to receive the full economic
benefit of his bargain with the plaintiff. Furthermore,
the defendant did not inform the plaintiff that its late
payments constituted a default under the lease agree-
ments until after the plaintiff sought to exercise its
options. It bears emphasis, moreover, that none of the
parties’ agreements specifies a payment date for any
of the plaintiff’s financial obligations except for the
payment of rent, which is due on the first of the month,
and payment on the promissory notes, which is due
on the eighth of the month. With respect to all other
obligations, however, the management agreement sim-
ply provides that ‘‘[the plaintiff] agrees to . . . [pay]
all accounts including, but not limited to . . . utilities,
payroll, insurance, franchise fees and royalties, trade
accounts, real estate and personal property taxes, and
maintenance of all equipment, facilities, furniture, fix-
tures and improvements.’’ There is no evidence that
the plaintiff was not in full compliance with all of its
financial obligations to the defendant as of August 22,
2003, the date on which the plaintiff effectively exer-
cised the options to purchase the properties. Indeed,
with respect to the litany of late payments identified
in some detail by the Appellate Court, most are pay-
ments that occurred after August 22, 2003. See Pack
2000, Inc. v. Cushman, supra, 126 Conn. App. 343–44.
Although two categories of late payments, namely,
health insurance and equipment leases, occurred during
periods that include August, 2003, there is no finding
by the trial court that any such payment was outstand-
ing on August 22, 2003, and the defendant makes no
such claim.
In an attempt to demonstrate that the trial court rea-
sonably could not have concluded that the plaintiff was
in substantial compliance with the terms of the parties’
agreements, the defendant refers to a number of tardy
utility, insurance and equipment lease payments that
the plaintiff tendered prior to its request to exercise
the options. The defendant’s contention appears to be
that, cumulatively, these payments constituted a mate-
rial breach of the parties’ agreements, and that such
a breach is inconsistent with a finding of substantial
compliance. As we previously indicated, however, the
trial court found that the late payments ‘‘were, on the
whole, made within in a commercially reasonable time.’’
Moreover, although the defendant undoubtedly found
some of those late payments to be frustrating and
annoying, there is no evidence that they resulted in any
financial loss to the defendant. As the plaintiff notes,
most of the payments were for very modest amounts in
relation to the significant payments that the defendant
received under the agreements.13
The defendant’s contention that the trial court was
required to find that these late payments constituted a
substantial and material breach of the parties’ agree-
ments, sufficient to justify terminating the plaintiff’s
purchase options under those agreements, is also diffi-
cult to square with the defendant’s testimony that he
understood and expected that there would be problems
of this nature because all of the billing statements for
the plaintiff’s business were sent to the defendant’s
office, even though those statements pertained both to
the plaintiff’s and the defendant’s businesses. Accord-
ing to the defendant, after he received a bill, he would
determine the plaintiff’s proportionate share and then
forward a copy of the bill to the plaintiff for payment. It
therefore is hardly surprising, as the defendant testified,
that this arrangement resulted in ‘‘all kinds of [tele]-
phone calls back and forth between [the defendant’s]
organization and [the plaintiff’s] organization, [as the
parties were] trying to figure out [who was] paying
which bill, which responsibility, what adjustments.’’
It also bears emphasis that the defendant, an experi-
enced attorney, drafted the parties’ agreements. It
stands to reason that if the defendant had wanted to
condition the plaintiff’s option rights on the plaintiff’s
punctual fulfillment of some or all of the terms of the
agreements, he readily could have incorporated such a
provision into the agreements. See Brauer v. Freccia,
supra, 159 Conn. 293–94 (lessor was bound under lease
option clause only ‘‘if the [l]essees shall have duly and
punctually fulfilled all the provisions, agreements, cove-
nants and conditions of [the] lease’’ [internal quotation
marks omitted]). As it stands, however, the agreements
do not even specify a payment date for the plaintiff’s
secondary obligations, which constitute the bulk of the
payments at issue. The agreements also do not contain
a provision stating that time is of the essence with
respect to any payment. It is well settled that, ‘‘[when]
a time for performance is stated in an agreement, a
party’s tender of performance within a reasonable time
thereafter will be considered substantial performance
unless the parties intended that time for performance
be of the essence. See J. Calamari & J. Perillo, [The
Law of] Contracts (2d Ed. [1977]) § 11-22, pp. 409–10.
[When] the agreement does not specifically state that
time is of the essence, it is presumed not to be unless
the parties have expressed a contrary intent.’’ Mihalyak
v. Mihalyak, 11 Conn. App. 610, 616, 529 A.2d 213 (1987).
Courts have applied this rule to a lessee’s performance
under a lease when a lessor claimed that untimely pay-
ments terminated the lessee’s right to exercise an
option. See, e.g., Robinson v. Cline, 255 Ark. 571, 574,
501 S.W.2d 244 (1973) (lessee did not lose right to
enforce option to purchase on basis of failure to tender
timely rental payments when there was no provision
in lease for forfeiture based on untimely payments and
no ‘‘time is of the essence’’ clause in lease [internal
quotation marks omitted]); Continental Oil Co. v.
McNair Realty Co., 137 Mont. 410, 427, 353 P.2d 100
(1960) (‘‘[when] a lease with [an] option to purchase
[did] not state that time [was] of the essence, [the]
failure of the optionee to perform the covenants strictly
at the time they may or should be performed [did] not
cause him to lose his right to specific performance of
the option’’). The fact that the parties’ agreements in the
present case do not specify that time is of the essence,
or provide a payment date for the plaintiff’s myriad
secondary financial obligations, reinforces the trial
court’s finding that the late payments at issue did not
materially impair the rights that the defendant bar-
gained for when he and the plaintiff entered into the
agreements.
II
We next address the defendant’s claim that the Appel-
late Court’s judgment should be affirmed on the alterna-
tive ground that the plaintiff failed to establish that it
was financially able to purchase the realty when it
sought to exercise the options, and, as a result, the
plaintiff failed to establish entitlement to specific per-
formance of the options. In support of this claim, the
defendant relies on the principle that a buyer seeking
specific performance of a contract for the sale of real
property must demonstrate his or her financial ability
to purchase the property, even if the seller has repudi-
ated the contract without justification. See, e.g., Steiner
v. Bran Park Associates, 216 Conn. 419, 423, 582 A.2d
173 (1990) (‘‘A buyer seeking specific performance must
prove that he was ready, willing and able to purchase
the property. . . . A buyer must prove his financial
ability to go forward even when a seller entirely refuses
to participate in a closing.’’ [Citations omitted; internal
quotation marks omitted.]). The defendant further con-
tends that the trial court’s finding that the plaintiff was
ready, willing and able to make those purchases on
August 22, 2003, was clearly erroneous, first, because
there is no evidence of the plaintiff’s financial condition
at the time it sought to exercise the options and no
evidence demonstrating that the plaintiff had obtained
the necessary financing, and, second, because there is
nothing in the record to indicate how much the plaintiff
would have had available to pay for the realty. We
disagree with the defendant.
The following facts and procedural history are rele-
vant to our analysis of this issue. On April 2, 2009, the
Appellate Court directed the trial court to articulate,
inter alia, whether the court found that the plaintiff
had established that it was ready, willing and able to
purchase the properties when it sought to do so in
August, 2003.14 In its articulation, the trial court first
noted that the defendant claimed that the plaintiff was
required to present evidence of a mortgage commitment
in order to demonstrate that it was financially able
to complete the purchases. Relying on Romaniello v.
Pensiero, 21 Conn. App. 57, 61, 571 A.2d 145 (1990), the
trial court concluded that, although proof of a mortgage
commitment may be necessary in some cases, it is
unnecessary when, as in the present case, the lessor
has refused to convey the property after a lessee’s valid
exercise of an option to purchase. In such circum-
stances, the court concluded, the lessee need only prove
by a preponderance of the evidence that it ‘‘could have
obtained a mortgage commitment’’ when it sought to
exercise the option. (Internal quotation marks omitted.)
The trial court further concluded that, although ‘‘[the]
plaintiff did not present specific evidence at trial regard-
ing its financial situation at the time it sought to exercise
the options, the surrounding circumstances fully sup-
port[ed] the conclusion that [the] plaintiff could have
procured a mortgage commitment at that time.’’
In support of this conclusion, that trial court noted
that, at the time of trial, the properties at issue had
produced income sufficient to enable the plaintiff to
pay the defendant in excess of $1.3 million under the
lease and promissory notes. The trial court also credited
the testimony of the plaintiff’s vice president, Anderson,
that the plaintiff ‘‘always was ready’’ to close, that a loan
was ‘‘all set up’’ when the plaintiff sought to exercise the
options, and that the only thing the plaintiff needed to
finalize the loan was the defendant’s cooperation in
procuring the appraisals. As further evidence of the
plaintiff’s sound financial condition during the relevant
time frame, the trial court also relied on the fact that the
plaintiff had successfully purchased a similar property
from the defendant in March, 2005. Finally, the trial
court observed that the defendant had presented ‘‘[no]
evidence that [the] plaintiff was in a compromised finan-
cial position at the time it sought to exercise the options
. . . . [The] defendant’s evidence of [the] plaintiff’s
purported inability to procure credit was limited to
evidence of [the] plaintiff’s late payments to [the] defen-
dant, which appear to the court to have been caused
by administrative inefficiency as opposed to financial
insolvency.’’ In addition to the foregoing findings, there
was uncontroverted testimony that, at the time of trial,
the plaintiff was operating twenty-two Midas shops in
seven different states and had successfully purchased
thirty-two Midas shops since 1991. Because this evi-
dence was sufficient to support the trial court’s finding
that the plaintiff was ready, willing and able to purchase
the properties, we will not disturb that finding. See
Steiner v. Bran Park Associates, supra, 216 Conn.
423–24 (‘‘Whether a buyer [seeking specific perfor-
mance of a contract to purchase real estate] has the
requisite financial ability [to go forward with the pur-
chase of the property] is a question of fact. . . . A trial
court’s finding of [financial] inability, which involves a
factual issue, will not be reversed unless it is clearly
erroneous.’’ [Citations omitted; internal quotation
marks omitted.]).
In support of his claim that the trial court’s finding
with respect to the plaintiff’s financial ability was
clearly erroneous, the plaintiff relies on this court’s
statement in Frumento v. Mezzanotte, 192 Conn. 606,
473 A.2d 1193 (1984), that, ‘‘when a purchaser of land
is left to depend [on] a purchase price loan from a third
party who is in no way bound to furnish such funds, the
purchaser cannot be considered to be able to perform so
as to be entitled to specific performance.’’ Id., 617. In
a later case, however, we clarified that Frumento ‘‘did
not hold that in every case a buyer must have a written
commitment from a financial backer’’; (emphasis omit-
ted) Steiner v. Bran Park Associates, supra, 216 Conn.
425; rather, ‘‘what constitutes [financial] ability is a
question of fact to be determined in light of the circum-
stances of the particular case.’’ (Emphasis added; inter-
nal quotation marks omitted.) Id., 424.
The facts of Frumento are readily distinguishable
from the present case. In Frumento, a prospective buyer
brought an action for specific performance of a contract
to purchase real property after the prospective seller
refused to sell. Frumento v. Mezzanotte, supra, 192
Conn. 610. The trial court concluded that the buyer was
not entitled to specific performance because he failed
to establish that he was financially able to tender the
purchase price of $35,000. See id., 610–11. In affirming
the trial court’s judgment, this court noted that the
only evidence that the buyer presented to establish his
financial wherewithal to complete the purchase were
two bank statements indicating balances that were
nowhere near sufficient to cover the purchase price,
and ‘‘his own testimony regarding his ability to secure
a loan from his parents. [The buyer] offered no evidence
of any promise or commitment by his parents to make
any loan.’’ Id., 616. ‘‘He further testified that he had no
commitment from a bank to lend him money, and that
he was to tender cash at the closing.’’ Id., 615. In light
of these facts, this court concluded that the trial court’s
finding that the buyer had not sustained his burden of
proving that he was ready, willing and able to purchase
the subject property was not clearly erroneous. Id., 618.
In contrast to Frumento, there was ample evidence
in the present case from which the trial court reasonably
could find that the plaintiff was financially able to com-
plete the purchase. That evidence included that the
plaintiff already had paid the defendant in excess of $1.3
million, the plaintiff was financially able to purchase a
similar property from the defendant in 2005, and the
plaintiff already owned twenty-two other Midas shops.
In light of this evidence and Anderson’s testimony that
the only impediment to finalizing a loan in August, 2003,
was the defendant’s refusal to cooperate in the procure-
ment of the appraisals, it was reasonable for the trial
court to find that the plaintiff would have been able
to obtain whatever financing it may have needed to
complete the purchase if the defendant had not repudi-
ated the plaintiff’s right to purchase the properties in
the first place. Cf. Romaniello v. Pensiero, supra, 21
Conn. App. 61 (‘‘Although a plaintiff seeking specific
performance of a sales contract must prove that he was
ready, willing and able to effectuate the sale, he need
not make a formal tender of the purchase price in the
event that the [seller] breaches the contract. . . . The
law does not require a party to proceed with prepara-
tions for performance if such preparations would be
futile. . . . Here, the [buyer] was not required to . . .
seek a mortgage commitment before a sales contract
had been prepared. Such acts, in light of the [sellers’]
refusal to perform, would indeed have been futile, since
mortgage commitments are based on particular values
at particular points in time and are not valid indefinitely.
[It was sufficient that] [t]he [buyer] proved to the satis-
faction of the [trial] referee that he could have obtained
a mortgage commitment at any time . . . .’’ [Citations
omitted; emphasis omitted.]). Accordingly, we reject
the defendant’s contention that the evidence was insuf-
ficient to support the trial court’s finding that the plain-
tiff was ready, willing and able to effectuate the
purchase of the properties when the plaintiff sought to
exercise its purchase options.
The judgment of the Appellate Court is reversed and
the case is remanded to that court with direction to
affirm the judgments of the trial court.
In this opinion ROGERS, C. J., and NORCOTT, EVE-
LEIGH, McDONALD and VERTEFEUILLE, Js., con-
curred.
* The listing of justices reflects their seniority status on this court as of
the date of oral argument.
1
The plaintiff brought separate actions seeking specific performance of
the options with respect to each of the two shops.
2
ARCO was not named as a defendant in the present actions and, conse-
quently, is not a party to this appeal.
3
One of the shops is located in the city of New London and the other is
located in the town of Groton.
4
The trial court stated that ‘‘[t]his decision renders moot the issue of
whether the [plaintiff’s] subsequent exercise of the options on May 16, 2006,
and May 19, 2006, [was], in fact, valid, particularly in view of [the defendant’s]
letter dated September 2, 2003 . . . declar[ing] [the] plaintiff out of compli-
ance with the management agreement. Given the court’s finding that the
plaintiff was in substantial compliance with the agreements [at the time of
the first exercise], the court finds that [the] plaintiff’s subsequent exercise
of its options was effective.’’
5
The defendant thereafter filed a motion to open the judgments and for
reconsideration, which the trial court denied.
6
Having concluded that the defendant was entitled to judgments as a
matter of law upon application of the strict compliance standard, the Appel-
late Court did not reach the defendant’s additional claims that, (1) even if
a substantial compliance standard applied, the trial court’s finding that the
plaintiff substantially complied with the terms of the agreements was clearly
erroneous, and (2) the trial court incorrectly concluded that the plaintiff
was entitled to specific performance of the options because the plaintiff
failed to prove that it was financially able to purchase the property when
it sought to do so. See Pack 2000, Inc. v. Cushman, supra, 126 Conn. App.
341 n.1.
7
The defendant does not dispute that, in accordance with the parties’
agreements, the plaintiff’s request to exercise the options was timely and
in writing.
8
With respect to the applicable standard of review, the scope of that
review ‘‘depends [on] the proper characterization of the rulings made by
the trial court. To the extent that the trial court has made findings of
fact, our review is limited to deciding whether such findings were clearly
erroneous. When, however, the trial court draws conclusions of law, our
review is plenary and we must decide whether its conclusions are legally
and logically correct and find support in the facts that appear in the record.’’
(Internal quotation marks omitted.) Cavanaugh v. Newtown Bridle Lands
9
In Brauer, this court relied primarily on Lake Shore Country Club v.
Brand, 339 Ill. 504, 522, 171 N.E. 494 (1930), in support of its determination
that the lessees’ failure to pay rent for seven months defeated their right
to purchase the leased property. See Brauer v. Freccia, supra, 159 Conn.
294. In Brand, the option at issue required the lessee, among other things,
to build a clubhouse on the leased property as a condition precedent to the
lessee’s right to purchase, but the lessee failed to do so. See Lake Shore
Country Club v. Brand, supra, 506–507, 514. In reversing the trial court’s
judgment granting the lessee specific performance of the option, the Illinois
Supreme Court observed that ‘‘[a] court of equity cannot relieve the optionee
from the effect of his failure to comply with the conditions on which he
has been granted the privilege of buying’’; id., 522; and, further, because the
lessee ‘‘was in default . . . at the time it gave notice of its election to
purchase, it [did] not [meet] the conditions precedent to its right to exercise
the option.’’ (Emphasis added.) Id., 524. Clearly, the failure of the lessee in
Brand to construct the clubhouse constituted a material breach of the
parties’ agreement.
10
We note that, even when there has been a material breach of a lease
with an option to purchase, courts frequently have held that, if the lease
contains a termination provision pursuant to which the lessor is to provide
written notice of the default to the lessee and the opportunity to cure—
like the default provisions found in the parties’ agreements in the present
case—the lessor’s rights must be read as qualified by that provision, so that
the lessor’s failure to provide notice of an alleged default precludes the
lessor from declaring a forfeiture of the option predicated on that default.
See, e.g., Cinema Development Corp. v. Two Thirty Eight Realty Corp., 149
A.D. 2d 648, 649, 540 N.Y.S.2d 305 (1989) (when provision of lease
governing default required written notice of default, ‘‘notice provision [was]
a condition precedent to the landlords’ ability to use a default as a reason
to deny the [tenant’s] rights under the lease, including the [tenant’s] option
to purchase’’); Rowe v. Dorman, supra, Texas Court of Appeals, Docket No.
06-12-00024-CV (affirming trial court’s judgment granting specific perfor-
mance of option agreement, in part because there was no evidence that
lessor provided written notice of default as required by lease); cf. Entrepre-
neur, Ltd. v. Yasuna, 498 A.2d 1151, 1165–66 (D.C. 1985) (lessor’s notice
to lessee of breach was insufficient to extinguish option because notice did
not specify nature of breach complained of). We need not address this issue,
however, because the present case does not involve a material breach of
the terms of the parties’ agreements.
11
The Appellate Court also relied on Pear v. Davenport, 67 Mass. App. 239,
244–45, 853 N.E.2d 206 (2006), for the proposition that a strict compliance
standard applied to the plaintiff’s performance under the agreements. See
Pack 2000, Inc. v. Cushman, supra, 126 Conn. App. 349–50. Pear is also
inapposite, however, because it involved the issue of whether a lessor’s
acceptance of rental payments after a material breach constituted a waiver
of the lessor’s right to terminate the option on the basis of such a breach.
See Pear v. Davenport, supra, 240. In Pear, the trial court found that, ‘‘[o]ver
the term of the lease, the [lessees] were late in paying their rent on no less
than fifty occasions. In spite of the tardiness, the [lessors] always accepted
the rent and never exercised [the] default option as contained in [the lease].
It was only when the [lessees] exercised their option to purchase that the
[lessors] invoked the [default] provisions [and asserted that the lessees had
forfeited the option to purchase].’’ (Internal quotation marks omitted.) Id.,
241. On appeal, the lessees claimed that, in light of these facts, the trial
court improperly concluded that the lessors did not waive the condition
precedent of timely rental payments by accepting all of the lessees’ late
payments. See id., 240. The Massachusetts Appeals Court rejected this claim,
concluding that, although acceptance of rent after a breach generally consti-
tutes a waiver of the right to declare a forfeiture of the lease, ‘‘a waiver of
the conditions with respect to the tenancy will not be a waiver of the
conditions for the option unless the lessor makes a separate waiver of those
conditions.’’ Id., 243. Pear represents a decidedly minority view on the issue
of waiver. Most courts that have considered the issue have concluded that
a lessor’s acceptance of rental payments after a breach constitutes a waiver
of the breach with respect to not only the lease but the option, as well. See,
e.g., Dillingham Commercial Co. v. Spears, 641 P.2d 1, 7–8 (Alaska 1982)
(‘‘[a]fter years of accepting late rental payments [the lessor] cannot claim
that the default attending such late payment excuses her from performing
under the purchase option’’); Robinson v. Cline, 255 Ark. 571, 574–75, 501
S.W.2d 244 (1973) (lessor waived right to declare forfeiture when lessor
accepted late rental payments and never notified lessee of intent to declare
forfeiture of option on basis of such payments); Steven W. Barrick & Associ-
ates v. Witz, 147 Ill. App. 3d 615, 619, 498 N.E.2d 738 (1986) (‘‘Under Illinois
law . . . waiver principles clearly apply to options . . . . [A] [l]essor’s
acceptance of rent accruing after a breach, with knowledge of the breach,
is a well-established indication of the waiver of the right to forfeit the
lease on that ground.’’ [Citation omitted.]); Okey, Inc. v. American National
Bank & Trust Co., 96 Ill. App. 3d 987, 991, 422 N.E.2d 221 (1981) (‘‘even if
prompt payment of rent were construed to be an explicit condition to the
exercise of the option . . . waiver of prompt payment of rent could estop
[the] lessor from asserting nonpayment as a bar’’); Panhandle Rehabilitation
Center, Inc. v. Larson, supra, 205 Neb. 611 (‘‘[when] a party to a [lease
option] contract, with knowledge of a breach by the other party, receives
money in the performance of the contract, he will be held to have waived
such breach’’ [internal quotation marks omitted]); see also annot., ‘‘Lessee’s
Breach of or Default Under Lease Agreement as Affecting His Right in
Respect of Option To Purchase Under the Lease,’’ 53 A.L.R. 3d 435, 449, § 8
[a] (1973) (collecting cases and observing that ‘‘courts have generally held
that the acceptance of rent after the lessee’s breach or default in the terms
of the lease constituted a waiver of the default so as to entitle the lessee
to enforce the option to purchase’’). In the present case, although it is
undisputed that the defendant accepted all of the plaintiff’s late payments
while purporting to reserve his rights under the agreements, the trial court
did not reach the issue of waiver because of its determination that the
plaintiff had substantially complied with the parties’ agreements. In this
court, the plaintiff raises waiver as an alternative ground for reversing the
judgment of the Appellate Court. Because we conclude that the trial court
correctly determined that the plaintiff is entitled to specific performance
of the options, we, like the trial court, have no reason to address the plaintiff’s
waiver argument.
12
We note that the defendant relies on the same case law in arguing that
the plaintiff’s performance under the parties’ agreements was governed by
a strict compliance standard. In addition, the Appellate Court relies on 77
Am. Jur. 2d 159, Vendor and Purchaser § 40 (2006), 92 C.J.S., supra, pp.
144–45, and 25 R. Lord, Williston on Contacts (4th Ed. 2002) § 67:84, pp.
499–502, for the proposition that the plaintiff should be deemed to have
forfeited its rights under the parties’ agreements unless it complied strictly
with the terms of those agreements. See Pack 2000, Inc. v. Cushman, supra,
126 Conn. App. 350. These authorities, however, merely recite the general
principle that an option must be exercised in strict accordance with the
terms governing its exercise.
The dissenting justice contends that, because ‘‘[o]ption contracts are a
type of unilateral contract,’’ the general rule of contract interpretation appli-
cable to such contracts, namely, that they are to be construed strictly against
the optionee, should apply in the present case. We disagree. As the dissenting
justice acknowledges, to the extent that this rule of strict construction
applies to unilateral contracts, it does so because a hallmark of such con-
tracts is the fact that there is ‘‘no mutuality of obligation between the parties.
See [e.g.] 1 E. Farnsworth, [Farnsworth on] Contracts (1990) § 3.24 [pp.
290–91] . . . .’’ (Citations omitted; internal quotation marks omitted.) In
the present case, however, the parties’ option agreement is not ‘‘a simple
unilateral contract of option’’; Williams v. Lilley, 67 Conn. 50, 56, 34 A. 765
(1895); rather, the option agreement is but one component of the parties’
bilateral lease and management agreements. This court long has acknowl-
edged this distinction. See, e.g., id. In recognition of this distinction, courts
construe the option provision no differently from the remainder of the
bilateral contract, except with respect to the requirements of the option
provision that pertain solely to the option, namely, the requirements govern-
ing the exercise of the option. To conclude otherwise would deprive the
lessee of his bargained for option rights solely on the basis of his failure
to comply strictly with wholly trivial and immaterial terms of the lease. As
the Massachusetts Appeals Court recently observed, minor, immaterial or
inconsequential breaches that do not prejudice the lessor will not preclude
a lessee from exercising a purchase option; otherwise, ‘‘[an] option would
be virtually meaningless, as [the lessor] could seize on any number of trivial,
technical violations of the lease in order to avoid it.’’ Trinity Realty I, LLC
v. Chazumba, LLC, supra, 77 Mass. App. 912. The dissenting justice has
identified no reason to deviate from this general rule, and we know of none.
13
For example, one such late payment that was particularly upsetting to
the defendant was a late payment to the telephone company in the amount
of $217.09.
14
The Appellate Court also directed the trial court to articulate whether
it had considered the doctrine of unclean hands. That issue is not before us.